Frugality is great.
But only if you’re frugal out of choice, and you define frugality in terms of being mindful about how you spend your money and making sure you spend in a way that aligns with your values and priorities.
On this same note, saving money is important. You can’t grow wealth without having wealth to grow in the first place.
As Mr Money Mustache (aka Pete Adeney) explains, savings rate is essential to getting into a good long-term financial position.
In fact, I created a video illustrating this for the now-defunct FIREkiwi blog:
BUT!
If you’re focused entirely on frugality and savings rate, you might be missing the forest for the trees.
At a personal level, extreme frugality involves squares that I can’t circle.
I recently wrote about the myopia of compound interest. One of the things that I noted was that focusing on compound interest from traditional investments misses out on the bigger picture – for many young people, for instance, the best investment you can make is in education, even if this investment looks more like consumption, and doesn’t show up in your balance sheet or generate any passive income.
In other words: for many people, it’s smart to go through phases of your adult life where you “spend” more than you earn.
More and more, I’m advocating people to invest in themselves, in their health, and in their relationships. This is especially the case with resourceful people.
Quite often, I have clients who have goals to travel or make a life transition at some point in the future. I tell them that, so long as it’s not permanent, they can afford to take their foot off the pedal for a year or three. They can afford to take a risk or three.
Life is for living, not existing. All of our decisions involve trade-offs, and it’s about making the trade-offs that are right for you. Many times, these adventures end up working in your favour as well.
You’ve got to spend money to save money
My wife and I often joke that “you need to spend money to save money”.
Usually, this is in the context of buying things we don’t strictly need, but which are on sale, like clothes and shoes.
(“I couldn’t afford NOT to buy it!”)
But it’s true more broadly.
Hand on heart: sometimes the best way to save money is to spend money. At least over the long-run.
Sometimes, I think spending more on some things is actually productive – and not just in an “it makes me happy” sense.
From one perspective, buying quality is often a good investment. It’s better to spend twice as much on a pair of shoes that will last for more than twice as long as a pair of shoes half the price.
It’s also much easier to be frugal when you feel like you have most of the things you want or need. (Even if it makes you hard to buy gifts for…)
But the most important point I want to make is that spending money can increase opportunities, income, and savings over the long-run.
Time and money
My wife and I pay for a babysitter once or twice a week. Partly it’s for sanity. Or, as this Harvard Business School paper suggests, it’s to buy “marital bliss”, since “Time-saving purchases promote relationship satisfaction”.
Another reason is to expose our kids to different people and routines, so they become more adaptable human beings with a broader perspective than the cult of our family.
But partly it’s so I can spend time on my business. I’m not employing someone in the business, but I’m paying to free up time to work, which in turn will enable me to generate more in income than the cost of the babysitter.
It’s an example of spending money to save time so we can focus our energy to generate more income. (This is also my justification (or rationalisation?) for paying for a cleaner and a gardener.)
Signalling (or: the power of pulchritude)
One of the most popular articles I wrote in 2018 described how living doesn’t cost much, but showing off does. I talked about evolutionary psychologist Geoffrey Miller’s book Spent, which among other things describes “the fundamental consumerist delusion”:
“products can aim to advertise one’s status, and act as status symbols, but they do not actually confer status. That is done by other people: one’s status dwells in the minds of observers.”
This is true. As Miller explains, “we greatly overestimate how much attention others pay to our product displays”.
But there are times where the cost-benefit balance is in favour of signalling.
At minimum, I think many people can justify spending more money on clothes and accessories. I don’t think I could bring myself to spend $2,000 on a Burberry trench coat or $18,000 on a Rolex Daytona. But spending enough so you’re wearing clothes that look good (and among other things, have good fit and colour) and make you feel good, is probably a worthwhile investment.
Clothes convey a message about you to the outside world.
This may seem superficial. But as Oscar Wilde says, “It is only shallow people who do not judge by appearances”.
The reality is, people will make assessments of you based on what you wear and how you wear it. It’s not something you can opt-out of.
There’s a lot of research confirming that more attractive people benefit from a “halo effect” which results in greater employment opportunities, higher incomes, and shorter prison terms(!) than less attractive people.
We might as well accept it and embrace this reality. Because impressions matter, both personally and professionally.
Sometimes, expenses are investments
One of the thing that strikes me as a business owner is that a lot of my expenses are quite speculative.
I keep my expenses pretty low, even for a professional services business. I work from home so I don’t have to lease office space.
My biggest expenses relate to boring stuff like registration, professional indemnity insurance, membership of industry groups, and professional development.
But I try different things with this business. Some of it, you see on this blog. My office has various gadgets that I thought would be useful for the business but that I haven’t used extensively (or, at least, not yet…). I buy software and subscribe to services that may or may not be useful.
Some of these purchases prove really useful. Some of these purchases will prove useful, in time. The challenge is, I don’t know what those expenses will be ahead of time. Many of these expenses involve a gamble of some sort.
The thing is, it’s easy to think of these things as “expenses”. But they aren’t just expenses. They are investments.
Some of this expenditure is wasted money. But sometimes the investment pays enormous dividends. I can get a return on investment, even if it doesn’t show up as an asset on my personal or business balance sheet.
What is true in business is true in our personal lives as well.
Books
A simple example: books.
I love reading. I wish I could spend more time reading. I read most books on Kindle. I buy all of the books I read. If I read a book in physical form, I also buy it.
I love libraries, and in some ways, they feel like a spiritual home for me. But I tend to use libraries to help me find books I might be interested in reading. Or as a place to get away and think.
The reason for this is that when I read, the main investment is my time and attention. It’s not the $10 or so to buy it on Kindle.
When I buy a book, I add value to that book as well. I take copious notes. I highlight hundreds of passages, which I progressively summarise, so the books that really resonate with me, become a part of who I am.
If I can’t write in the margins, or dog-ear pages, the book won’t stay with me in the same way.
When I read a book from the library, I tend to read it and forget it. When I buy a book and make it my own, it stays with me. It’s a much better investment of my time and attention. I become a more interesting and effective person for doing so.
(Some other articles about consuming media: an article I wrote in 2015 (which needs to be updated), plus the Farnam Street blog’s article about How to read a book.)
Joyful purchases
Another example: many of the material things that bring me the most joy were speculative purchases. I had no idea whether I’d like them at the time. Like:
- my height-adjustable desk;
- my Anova sous vide cooker; and
- all of my colourful shoes (pink shoes! red shoes! yellow shoes!).

I’ve made other purchases recently which I haven’t used but which may end up being worthwhile over the long-run, like my Wahoo KICKR SNAP bike trainer.
Granted, maybe these aren’t investments in any real sense. Except In the sense of being investments in my personal happiness and life satisfaction.
(When it comes to health-related purchases, I’m especially sanguine. If there’s a good chance that the purchase will make a difference in terms of long-term physical fitness (and short-term energy levels), then the purchase is worth the bet. Your health is your wealth, after all.)
Go out, into the world
It’s one thing to save money by limiting the amount of things you do in life. You can save money by not travelling. You can save money by getting books from the library rather than buying them.
But one of the reasons my wife and I work is to be able to do these things. And so long as we will still be okay over the long run, there’s nothing wrong with it.
Perhaps we could retire earlier if we were more frugal. But it’s a trade-off we’re prepared to make.
There’s also an argument that it will allow us to earn more over the long run.
For example: for better or worse, the majority of people I deal with in my day-to-day life are people with higher incomes and/or a lot of wealth. This includes clients, colleagues/peers, and people in my general social orbit.
I did not, however, have any exposure to this world until my mid- to late-twenties. Frankly, I didn’t have a lot in common with people who had shared these life experiences.
Spending money to have experiences which put me on a similar baseline to these people makes it much easier to develop rapport with a wider range of people.
It means I’m more able to identify with, and be on the same wavelength, with people who I’m likely to deal with professionally. In fact, for all of the many (great) NZ-based money blogs out there, my sense is that this is one of the things that distinguishes my blog, and the readership I have. It’s not conscious. But somehow, there are embedded assumptions and values that act as dog whistles.
It also makes me feel more comfortable embracing and celebrating my more “bogan” inclinations. For example, I’m very happy to share my affection for Longridge Merlot Cabernet Sauvignon 2 litre boxes of cask wine (costing $17 to $22 per box from New World, depending on whether it’s on special), confident in the fact that I like the way it tastes more than most expensive bottles of wine.

In some ways, I’ve ended up where I began – drinking the same sort of stuff I drank when I was at university.
But this time, there are nuances, and a confidence informed by the fact it’s a choice.
Without this long and winding path I’ve taken, I wouldn’t have known that this is what I really liked. I wouldn’t have known I prefer snowboarding to skiing. I wouldn’t have realised that I have a preference towards re-visiting familiar places compared to going to new places all the time. I wouldn’t have known that buying a new car wouldn’t increase my satisfaction with life.
I could have known these things in theory. But how could I know whether my conclusions were true, or rationalisations?
You don’t learn who you are through theory. You learn who you are through practice. And practice costs money and involves risks.
A final comment
Don’t get me wrong. Saving is important. If you can’t build wealth by saving, you can’t grow wealth by investing.
In some ways, this article might be a pendulum swinging too far in the other direction, in response to reading one-too-many-times about the importance of “saving”.
The key is, life has stages and phrases. The key is to save enough over the long-run.
And don’t get blindsided by well-meaning people: there are many ways to invest in life.